Fnce 5408: Valuation of Financial Assets (equity and Fixed Income)
By: c31ot6 • October 31, 2017 • Term Paper • 1,309 Words (6 Pages) • 1,420 Views
FNCE 5408: Valuation of Financial Assets (Equity and Fixed Income)
Fall semester 2017, MBA Program
Thursday, 230 - 530
Chinmoy Ghosh, Head, Department of Finance
Chinmoy.Ghosh@business.uconn.edu
860 486 4431
Prerequisite: FNCE 5101. Open to MBA students, others with permission (RG4022)
Catalog description: The objective of this course is to develop models for allocation of funds among asset classes, and security selection to construct a diversified portfolio. It focuses on the analysis of industry segments, and valuation of common stocks and bonds. Various valuation models – discounted cash flow, and relative (comparables) valuation are discussed. Topics include analysis of business models, measurement of risk and cost of capital, valuation of common stocks, and valuation and measurement of risk of bonds and bond funds. Preparation of analysts’ reports is an integral part of the course.
This course is the first part of a two-part valuation course. Part I is offered during Fall and part II is offered during Spring. Both courses are designed to train students in the art of security selection, preparing analysts’ reports, risk management through asset allocation, performance evaluation, and preparing reports for presentation to the client which for managers of the UConn Student Managed Fund (SMF) is the UConn Foundation. Both courses are designed specifically with the SMF managers in mind, although other interested students are encouraged to take the course as MBA credit.
The course addresses the following issues:
- How to estimate the value of alternative corporate and business strategies and specific programs within these strategies.
- How to use value-based management to review and target the performance of business operations. Identify the main drivers of value and how to enhance them.
- Value derives from a company’s ability to generate cash flows and cash-flow based returns on investment. How to become value managers.
We note that the course focuses on both “what is value”, and “how to create value”. As managers and analysts, your job is to assess if the managers of the company you are interested in are behaving in accordance with the doctrine of value maximization.
Throughout the semester, the message of the course is simple and same: Companies thrive when they create real economic value for their shareholders. Companies create value by investing capital at rates of return that exceed their cost of capital.
Recommended Text: Valuation: Measuring and Managing the Value of Companies, Tim Koller, Marc Goedhart, David Wessels
Case Assignment
Cases are to be analyzed by groups of students. The class will be broken up into 4, at least two of which will be a manager of the Student Fund.. The names of the students in each group must be submitted to the instructor by Th, Sep 14.
Cases to be submitted by 4pm Tuesday Dec 12
- RJR Nabisco Group 1
- Phon-Tech Group 2
- Warren Buffett 1995 Group 3
- Comerica Incorporated Group 4
Grading:
Individual In-class Exam (230-530 pm Oct 19) 25%
Individual In-class Final (230-530 pm Dec 11) 25%
Participation and attendance 5%
Group Class Assignments (3) 25%
Group Case Analysis report – Due 4pm, Dec 12 10%
Group Analyst report Due 4 pm Dec 12 10%
Total 100%
Workshop Description - Fall 2017
Professor Michel Rokatomavo
- Bloomberg Applications in the Classroom: Describes
- how to perform a criteria-based Bloomberg search for a stock to be valued
- how to search for Bloomberg M&A stocks and news
- how to get Bloomberg cash-flow inputs for valuation
- how to transfer Bloomberg valuation inputs into Excel
- how to search for Bloomberg cost-of-capital inputs for valuation
- how to create, monitor, and manage a Bloomberg portfolio
- P&G Valuation on Excel and Bloomberg: Describes
- how to search for Bloomberg peer companies for relative valuation
- how to search for Bloomberg industry valuation outlook
- how to graph and download Bloomberg time series of valuation inputs
- the differences between the dividend growth and FCF valuation models
- how to implement the above valuation models on Excel
- how to interpret the Excel valuation results
- Valuation with Morningstar: Describes
- the FCFE model and its differences with the 3 above models
- how to perform a Morningstar criteria-based search for a stock to be valued
- how to find and download Morningstar time series as inputs to valuation
- how to populate the Excel valuation model
- how to interpret the Excel valuation results
- Performance Attribution Analysis : Describes
- the sourcing of portfolio value by selection and allocation
- an illustration of portfolio value sourcing
- possible extensions of criteria for portfolio value sourcing
- implementation and interpretation on Bloomberg
- implementation and interpretation on Morningstar
Schedule:
Class | Date | Material | Readings/Case |
1 | 8/31 | Introduction and Logistics | |
2 | 9/7 | Valuation of Bonds Characteristics of Bonds and Bond Quotes in the WSJ - T-bills, T-bonds, and STRIPS Analysis and Valuation of Bonds | Cases Worldcom Bond Issue RJR Nabisco Holdings |
3 | 9/14 | Valuation of Bonds (Contd.) Equity Valuation Business Models Investment Philosophy Valuation – Tools and Techniques
| Cases The Power of Business Models Why Business Models matter GMO: The Value versus Growth Dilemma Financial Statement Analysis Overview of Financial Statement Analysis Assessing a Firm’s Future Financial Health Basic Ratio Analysis and Equity Valuation Microsoft’s Financial Analysis Starbucks Corporation |
4 | 9/21 | Value Line Investment Survey Valuation – Tools and Techniques Group Assignment 1 (Bond Valuation) Due back on Oct 5 | Cases Does the CAPM work? Coke vs. Pepsi Nike – application of WACC Phon-Tech Corporation |
5 | 9/28 | Value Line Investment Survey | Warren Buffett 1995 |
6 | 10/5 | Multiples valuation | Introduction to Multiples Valuation (206095 Harvard) Corporate Valuation and Market Multiples (206039 Harvard) Walmart |
7 | 10/12 | Bank Valuation | Bank Valuation Issues |
8 | 10/19 | In-Class Individual Mid-term exam | |
10/26 | Session on Fixed Income - Christopher Wilkos – Chief Investment Officer – Phoenix | ||
8 | 11/2 | Workshop I (Prof Rokatomavo, from 4 - 545) Group Assignment 2 – Equity Valuation (Due Back on 11/16) | Bloomberg Applications in the Classroom (Prof Michel Rakotomavo) Screening, M&A and Equity Research, Excel Interface, Graphs, Equity Valuation, Portfolio Management |
10 | 11/9 | Workshop II (Prof Rokatomavo, from 4 - 545) | P&G Valuation on Excel and Bloomberg (Prof Michel Rakotomavo) Introduction and implementation of FCFE valuation methods on Excel and Bloomberg |
12 | 11/16 | Workshop III (Prof Rokatomavo (from 4 -545) | Valuation with Morningstar (Prof Michel Rakotomavo) Using Morningstar as a tool for equity valuation |
13 | 11/30 | Bank Valuation Chinmoy Ghosh (230 – 345) Workshop IV (Prof Rokatomavo, from 4-545) Group Assignment 3 – Due Back on Dec 12 | Comerica Performance Attribution Analysis (Prof Michel Rakotomavo) Basics, Extensions, Implementation on Bloomberg and Morningstar |
14 | 12/7 | Valuation of Private Business | Note on Valuing Pvt Businesses Bluntly Media |
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